Foreign investment is permitted in accordance with the prevailing lawsand regulations of the country. All foreign investors are permitted to invest, for the purpose of development and producing activities in all areas of industry, mining , agriculture and services. However, from the standpoint of the Iranian government, only those investments of investors shall be eligible to enjoy the privileges and protections under the Foreign Investment Promotion and Protection Act (FIPPA) who that have obtained the required license under the FIPPA..

Foreign investment is admitted under all forms of *”legal participation “ (Foreign Direct Investment) and / or contractual arrangements in Iran. By contractual arrangements we mean all forms of project financing methods within the framework of civil participation, buy back arrangements, and different types of Build, Operate and Transfer (BOT)schemes.

Foreign investment is defined to the employment of capital in an activity

in which there is a level of risk involved . FIPPA classified foreign

investment under two broad categories :

a) Legal participation (Direct Investment ):

Legal participation is defined to be a direct involvement of a foreign investor in the equity capital of a new or existing Iranian company. There is no restriction on the level of shareholding as well as

The right of foreign investor to run and control a company emanates from and is dependent upon his direct contribution in the equity capital of the company concerned.

b) Contractual arrangements:

Contractual arrangement is defined to be a set of mechanisms under which the utilization of foreign capital is solely based on agreements reached by the parties to a contract. In other words, the rights of the foreign investor is not yielded with his direct participation in the capital of the recipient Iranian firm , but through the arrangements agreed upon under a contract. This type of investment may be carried out in all sectors of the economy. under contractual arrangements, the return of capital and accrued profits have to be sourced only out of the economic performance of the project in which the investment is made without being dependent upon a repayment guarantee by the government , by the banking system as well as state own companies.

Foreign investment under contractual arrangement is permissible in all sectors of the economy , but in sectors reserved for the government , foreign investment may only be carried out under contractual arrangements.

There are seven types of juridical entity or company that can be established under the Iranian commercial code .From within different types, “ the Joint Stock Company ” in which the capital is divided by shares, is the most common and acceptable type of company that may be recommended to foreign investors. (for further information please refer to Establishing a Joint Stock Company in Iran published by OEITAI)

The ratios addressed in the said para has nothing to do with theshareholding percentage of foreign investment in a single investment case .As formerly explained ,no restriction with respect to the ceiling of foreign participation is imposed in Iranian companies. These ratios illustrate the proportion given to the value of goods and services produced by foreign investment in the global economy in each sector and subsector , respectively, verified at the time of issuance of the foreign investment license.( Value of foreign products in GDP).

Foreign investment in oil and gas upstream areas within framework of contractual arrangement is permissible whereas foreign investment in the form of direct investment (FDI) in those areas is not permitted .